Bondholders’ attempts to seize control of Virgin Australia from ‘winning’ bidder Bain suffered a significant setback when a Federal Court judge ruled the administrator doesn’t have to put the alternative bid to a shareholder vote.
However, reports are still suggesting the group plans to continue its fight to table an alternative offer, which will see a union representative given a seat on the board and the current management team remain in place.
Bain beat out Cyrus Capital Partners in May to become the administrator’s preferred bidder for the airline, yet bondholders have vowed to fight on to recoup more of their $2 billion investment.
The bondholders have made their move because they are owed $1,988 million altogether and have been told they will not receive the full amount. In total, 10,247 creditors, including 9,020 employees, are owed around $7 billion.
In the Federal Court on Tuesday, the bondholders’ barrister, Ian Jackman, said his clients were entitled to have their proposal, or Deed of Company Arrangement, voted for at the next creditors meeting on September.
But the barrister for administrator Deloitte, Dr Ruth Higgins, argued Bain’s proposal had already been accepted.
“There is a not a circumstance in the procedures as we understand it for the bondholders’ DOCA to be voted on at that second meeting and we want to avoid the impression that could occur,” Dr Higgins told the court.
She argued that, under the terms of the deal, if Bain’s proposal was not accepted, then the deal would go ahead as an asset sale instead.
“The structure of the arrangement is the sale will be implemented either via a transfer of shares to Bain if the creditors vote in favour of the Bain DOCA or by way of an asset sale.
“There was a time and a place if the bondholders sought to challenge the sale and it was some time ago. The bondholders were on notice that a sale was to occur by the end of June.”
Judge John Middleton backed the administrator and Bain, concluding, “The application is rejected. There’ll be no orders made for a ballot.”
It’s not clear where this decision leaves the bondholders, though The Sydney Morning Herald has suggested they plan to fight on.
Last week, Australian Aviation exclusively revealed that the bondholders plan to repay bidder Bain for the money it’s pumped in to keep the airline flying should its rival proposal be successful.
Separate court documents filed on behalf of hedge funds Broad Peak Investment and Tor Investments, who are representing the bondholders, also revealed their proposal would see unions enjoy a place on the board.
That’s significant given Monday’s revelation that relations between TWU and Bain appear to have strained.
Australian Aviation understands there is anger over the rumoured involvement of former Jetstar chief executive Jane Hrdlicka, who had a notoriously fraught relationship with unions in her role at the Qantas Group.
It was also confirmed last week that former Virgin Blue co-founder Rob Sherrard had been working with the bondholders on a deal alongside former chief financial officer Manny Gill, former network operations manager Andrew Lillyman, founding HR manager Bruce Highfield and former PR boss Heather Jeffery.